USD/JPY: bears reject bulls attempts at critical resistance

• USD/JPY bears are rejecting the bullish attempts of the 112.80 level -  38.2% of Octobers drop and have scored a low back down at 112.66 from a high of 112.84.
• Currently, USD/JPY is trading at 112.71.

USD/JPY has been building a more bullish case in recent sessions, despite ether being an air of caution in markets whereby investors continue to consider the worst-case scenarios of contagion on the EMs and DMs as a result of higher interest rates and defaults. 

The eurozone project is hanging on a thread and that too is emanating in sentiment. Brexit is proving to be a disaster for PM May and that aga continues while Italy keeps the debate of the EZ project alive as the nation seeks to violate the EC's budget spending rules. 

China and the US are no closer to becoming friendlier in terms of trade terms ahead of the G20 November summit and US yields remain elevated encouraging a catch-up bid in the US dollar as markets are reminded of the divergence between that of the US and wider global economic recovery. 

The week ahead

For the week ahead, most of the attention will centre around US data, the ECB and BoC. However, stock market performances will be dictated by earnings on Wall Street and what goes down in Chinese markets - all of which, via the cross flows will surely have an impact of yen flows. US GDP is a big data event while the ECB will be monitored for more info as to QE guidance. EUR/JPY could be a factor influencing USD/JPY - Especially if there is more of a downbeat tone from Draghi who suggest that risks to economic growth have somewhat intensified.

USD/JPY levels

• Support levels: 112.60 112.20 111.90.
• Resistance levels: 113.00 113.45 113.80.

Valeria Bednarik, Chief Analyst at FXStreet explained that technical readings indicate a limited upward momentum:

"In the 4 hours chart, the pair is between the 100 and 200 SMA, both directionless, while indicators turned lower within positive ground. The roof of the short-term figure and the mentioned 100 SMA currently converge in the 113.00 price zone, the immediate resistance and the area to surpass to anticipate another day of gains ahead."